Fremont Man Charged in Connection with Ongoing Tomato Industry Corruption Case
Former Purchasing Manager for Safeway Inc. Agrees to Plead Guilty to Fraud Charges in Connection with His Acceptance of Bribes from SK Foods

U.S. Attorney’s Office
January 06, 2010

Eastern District of California(916) 554-2700

SACRAMENTO, CA—United States Attorney Benjamin B. Wagner announced today that a former purchasing manager for Safeway Inc. MICHAEL CHAVEZ, 52, of Fremont, has been charged with two counts of wire fraud in connection with an ongoing federal investigation into various illicit activities in the tomato processing industry. He has agreed to plead guilty and is expected to appear in U.S. District Court in the near future to enter his guilty plea. CHAVEZ’s plea agreement is subject to court approval.

The case is the product of a joint and extensive investigation by the Federal Bureau of Investigation, the Internal Revenue Service, Criminal Investigation, and the United States Department of Justice’s Antitrust Division.

According to Assistant United States Attorney Sean C. Flynn who is prosecuting the case together with Barbara Nelson and Richard Cohen of the San Francisco Field Office of the Antitrust Division, a two-count felony charge was filed today in U.S. District Court in Sacramento against CHAVEZ, who between 2000 and 2007 served as Group Manager, Strategic Sourcing, for Safeway, one of the largest food and drug retailers in North America, with a principal place of business in Pleasanton, Calif. CHAVEZ admitted that, while working at Safeway, he received personal bribery payments from RANDALL LEE RAHAL, 61, of Ramsey, N.J. RAHAL served as a sales broker and Director of SK Foods L.P., formerly a California-based grower and processor of tomato products and other food products for sale to food product manufacturers, food service distributors and marketers, and retail outlets nationwide. SK Foods declared Chapter 11 bankruptcy in May 2009. CHAVEZ admitted to steering contracts for processed tomato products to SK Foods rather than industry competitors in return for the bribes.

CHAVEZ is the latest corporate purchasing manager to plead guilty to receiving bribes from SK Foods. ROBERT L. WATSON, 59, of White Plains, N.Y., JAMES RICHARD WAHL, 58, of Dallas, Texas, and ROBERT TURNER, 59, of Randolph, N.J., former purchasing managers at Kraft Foods Inc., Frito-Lay Inc., and B&G Foods Inc., respectively, have already pleaded guilty to receiving illicit payments from RAHAL. RAHAL pleaded guilty in December 2008, to participating in racketeering, bid rigging, and contract allocation conspiracies, among other charges. WATSON was sentenced in federal court in Sacramento on August 11, 2009, to two years and three months in prison to be followed by two years of supervised release. He was also ordered to pay $1,858,000 in restitution to his former employer, Kraft. The other defendants are awaiting sentencing.

In addition to a demonstrated pattern of commercial bribery, to date the Department of Justice’s investigation of SK Foods and its former corporate leadership has uncovered wide-ranging fraud with respect to the quality of tomato product that was produced, purchased and sold by the company. On November 17, 2009, former SK Foods Vice President, ALAN SCOTT HUEY, 53, of Monterey, pleaded guilty to participating in a conspiracy involving honest services fraud and causing the introduction and delivery for introduction of adulterated and misbranded food into interstate commerce with the intent to defraud and mislead. HUEY admitted that he routinely falsified, and directed other SK Foods employees to falsify, the various grading factors and data contained on Certificates of Analysis and other quality control documents that accompanied customer-bound shipments of tomato product that was produced, purchased and sold by SK Foods. Accordingly, SK Foods regularly shipped products which, while not a health threat, contained mold count levels that were above the federal regulatory threshold, or which bore altered dates of production or other falsified product information.

One SK Foods employee whom HUEY and his co-conspirators directed in this fashion was former Records and Business Analyst, JENNIFER LOU DAHLMAN, 48, of Lemoore, Calif. DAHLMAN pleaded guilty on February 18, 2009, to causing the shipment to SK Foods’ customers of processed tomato products that were adulterated and unsaleable domestically due to their excessive mold content.

Former SK Foods Vice President JEFFREY SHERMAN BEASLEY pleaded guilty to participating in honest services and mislabeling conspiracies on August 25, 2009. RAHAL, HUEY, DAHLMAN, WAHL, and BEASLEY are all cooperating in the government’s ongoing investigation.

In a related case, ANTHONY RAY MANUEL, 57, of Turlock, Calif., formerly an employee of Morning Star Packing Company and then of SK Foods, pleaded guilty on January 27, 2009, to embezzling approximately $975,000 from Morning Star and to filing a false tax return.

The maximum statutory penalty on the wire fraud charges is 20 years in prison, and a criminal fine of $250,000. The actual sentence, however, will be determined at the discretion of the court after consideration of the Federal Sentencing Guidelines, which take into account a number of variables and any applicable statutory sentencing factors.